Demand Supportive, But Sustained Buying In Futures Lacking

November 22, 2013 12:24 AM
 

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are around 1 cent higher, soybeans are 5 to 12 cents higher and wheat futures are 1 to 4 cents higher. I expect upward momentum to carry through to the daytime session. Cattle futures are expected to open mixed this morning while hog futures are seen opening lower.

 

* Late-season struggles continue for Aussie wheat crop. Late-season rains are causing yield and quality concerns with the wheat crop in Western Australia. Now, central, northern and eastern portions of the country are in line for heavy rainfall over the next week. Those heavy rains in eastern wheat production areas will come after the crop was nipped by recent frost. If late-season weather remains unfavorable, production forecasts from the country will start to decline, which could give wheat futures a boost.

The long and short of it: Given quality concerns with the Aussie wheat crop, demand for U.S. wheat is likely to build.

* Demand remains strong, but sustained buying missing in futures. The string of very strong export sales figures continued in the week ended Nov. 14, as the U.S. sold 1.376 MMT of soybeans and nearly 1 MMT of corn. China was a major buyer of both, accounting for 84% of the soybean total and more than one-third of the corn total. The weekly sales figures provided corn and soybean futures with support yesterday, but despite a strong demand base for soybeans and improving demand for corn, both markets have struggled to find sustained buying interest.

The long and short of it: Strong demand is being offset by expectations for record South American soybean production, keeping price action in futures choppy. The improving demand is being overshadowed by the record crop in the corn market, limiting the upside to corrective buying and keeping corn futures in the extended downtrend.

* Placements up, but feedlot numbers down. Traders are expecting this afternoon's Cattle on Feed Report to show Placements rose 10% last month amid falling feed prices and a strong cash market outlook. Despite the expected surge in the number of calves entering feedlots, the On Feed category is expected to be down nearly 6% from year-ago. Marketings during October are expected to have risen more than 1% from year-ago.

The long and short of it: Typically, a big Placements number would be price-negative for deferred live cattle futures. But with cattle numbers tightening and a strong price outlook into 2014, price pressure should be relatively limited if the pre-report estimates are confirmed.

 

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